1 Modul 9(Set3), Private & Confidential CMFAS Module 9 MCQ Mock Exam Which of the following documents need to be forwarded as evidence of insurable interest when applying, for a keyman policy? a. Company’s profit and loss statement for the last three years b. Keyman’s resume and payslip c. Keyman questionnaire d._ Fact Find that is completed on the keyman. a. All of the above b. L&I cL M&IV d. only When dealing with risks, one an Avoid the Risk, Cancel the Risk, Transfer the Risk or Accept the Risk a. True b. False Hospital Cash (Income) Insurance will provide the insured with a variable amount of daily income for each day in the hospital, depending on the costs incurred. a. True b. False If an insurer discovered a breach of utmost good faith all that the insurer could do is void the policy. a. True b. False Section 25(5) of the Singapore Insurance Act (Cap 142), revised ed 2000, states that MAS can request that an insurance company submit the application forms used to the Insurance Supervision Department. a. True b. False The Basis Clause converts any statements made by the applicant into a warranty which states that any mace mistakes in the application form is sufficient to void the policy however trivial it maybe. a. True b. False ‘The Basis Clause is not applicable to a third-party policy because the life insured should not be penalized for any mistakes that the policy owner makes. a. True b. False Insurable Interest needs to be proved only in the case of a Keyman Policy because the keyman is not necessarily the boss /owner/CEO of the business firm. a. True b. False Property and Casualty Insurance policies are contracts of indemnit a. True b. False10. n, 2 2B. “4 15, 16. v7. 18. 19. 20. Module 9 (S213) Private & Confedentiat Section 57(2) of the Singapore Insurance Act (Cap 142), revised ed 2000, states that person will have an insurable interest in his/her child or ward's life ifthe child or ward is a minor. a True b. False The rate of return on t-Bills is 3.25% and the nominal risk-free rate is 8.4% Hence my expected rate of inflation is: a 75% b, ~119% c. “9.5% d, ~0.95% An active (many buyers and sellers) primary market makes it easier for investors to trade theit financial assets, a True b. False Equities are traded oneither the money market or capital market. a. True b. False Fixed income securities are exposed to currency, default, reinvestment, interest rate risks, a. True b. False (Owners of equity are said to own a part of the company that issues the equity. a. True b. False Equity has higher price volatility as compared to debt. a. True b. False Unit trusts generate income through capital gains and dividends only. a True b. False Properties are a good inflation hedge because their price usually keep pace with inflation. a True b. False When comparing rettums over more than one period, the geometric mean is more appropriate than the arithmetic mean. a. True b. False The factors that influence the required rate of return are the length of time the funds are committed, the expected rate of the inflation and the risks involved. a. True b. False21. 23. 24. B. 26. 27. 29. 30, 31. Module 9(Se13) Prove & Confideral An insurer will use all the premiums paid to invest so that investment income can be made. a. True b, False Investment income helps to reduce the amount of premiums payable by the policy owner. a, True b. False ‘The loading also provides for a margin of profit. a. True b. False The reduction in age method simply states that the premium applicable to a male policy owner is the same as that of a female who is three years younger. a. True b. False Section 17 of the Insurance Act (Cap. 142) revised ed 2000 States that insurers who are registered to carry ‘on insurance business are required to maintain insurance funds with respect to their insurance business. a. True b. False Non-patticipating and participating products may be maintained in the same insurance fund. B Fae CPFIS and SRS can be used to purchase single premium policies Base For a Yearly Renewable Premium policy, the premium payable upon renewable is dependent on the insured’ attained age. a. True b. False A Third-party insurance involves two persons. a. True b. False An ADB rider is also known as a double indemnity rider because: a. The premiums payable on both the basic policy and the rider are equal b. The amount paid from the rider in the event of accidental disability is twice that of the basic policy ‘The amount paid from the rider in the event of accidental disability is usually the same as the basic sum assured 4. The waiting period before any benefits are payable from the ADB rider is twice that of the waiting period of the TPD rider. ‘A double indemnity rider has a benefits payable that can be three or more times that of the basic policy’s sum assured. a. True b. False32, 34, 37. 39, 40. Module 9 Se13) Private Confidential An ETPD rider expires one year earlier than the TPD rider, and the period for which it pays out benefits is five years shorter than the TPD rider. a. True b. False ‘A Hospital Cash (Income) Benefit Rider wil terminate once the total claims exceeds the daily hospitalization benefit. a. True b. False Non-participating products that do not accumulate cash values will not have the following features: grace period, non-forfeiture options, automatic premium loan or policy loan. a, True b, False ‘Types of nor-patticipating products include Annuities, Whole Life Insurance, Term Insurance and Riders only. a. True b. False ‘An endowment policy can be viewed as being made up of a term and a pure endowment policy. a, True b. False ‘The convertible option gives the insured the right to change his/her whole life policy into a term policy without providing evidence of insurabiity. a True b. False Riders can either be participating or non-participating. a. True b. False ‘The TPD rider expires one year before the ETPD rider, a. True b. False The: on the advice of the will determine the portion of the surplus to be distributed to the participating policy owners Chief Actuary 1. Director of Finance IL Chief Executive Officer IIL Board of Directors a W&l b. Migell ce. Mer 4d Vella. 42, 44. 46. 7. Module 9 (S18) Private & Confidential Paid-up Addition occurs when: a. The client pays up all future premiums remaining on the policy. b. Cash bonuses are converted to additional sum assured c. The client uses SRS or CPFIS to pay premiums d._ The client converts a regular/single premium policy to a limited-pay policy Bonus in Reduction of Premiums are bonuses that: a. Result in the permanent reduction of future premiums until the next policy anniversary b, Result in the permanent reduction of future premiums until the premiums payableare entirely eliminated c. Result in the permanent reduction of future premiums for the same term that the policy has already been in force d. Result in the permanent reduction of future premiums until the life insured reaches a specific age Policies that can be issued on a participating basis include: a. Term Insurance, Whole Life Insurance and Endowment Insurance only b. Whole Life Insurance, Annuities, Term Insurance, Endowment Policies and Riders only Whole Life Insurance, Endowment Insurance and Annuities only d. Whole Life and Endowment Insurance only ‘Terminal pr maturity Bonus will be paid upon: a. Death or maturity. In addition, all premiums payable are paid up without using non-forfeiture, automatic premium or policy loans b. Death or maturity. In addition, all premiums payable have not been discounted c. Death, TPD or maturity. In addition, all premiums payable are paid up without using any non- forfeiture, automatic premium or policy loans d. Death, TPD or maturity. In addition, all preniuins payable have not been discounted. ‘Common types of participating Whole Life policies include: I. Straight Life Policy Il. Limited-Payment Policy ID. Yearly Renewable Whole Life Policy IV. Pure Life Policy with Payor Benefit Rider a Tél b. T&M cL Mé i a Mev Both simple and reversionary bonuses can be surrendered for their cash value without affecting the basic sum assured of underlying policy. a. True b. False Cash bonuses paid out are based on the term of the policy. a. True b. False An.interim bonus is an addition made to the sum assured or the surrender value during the period between two general bonus distributions. a. True b. False49, 50. 51 53, Module 9 (S013) Private & Confidential ‘Surrender Value = Premiums paid + Bonusé a. True b. False Death Benefit = Sum assured + Bonuses credited. a. True b. False Variations in contract provisions of deferred and immediate annuities include: 1. _ Distribution of Benefits (or payout options) Il. Number of lives covered under the policy UL Increasing rate of annuity IV, Whether the annuity is entitled to bonuses a 1&IVv b. W&M © LM&IV dd. Allof the above Guaranteed Minimum Payout Annuity guarantees that the insurer will pay: a. ASum assured as specified in the policy contract b. A Minimum number of income benefit payments or a refund of a percentage of premiums paid The annuity income benefits until the juvenile in the policy reaches a specific age d. Annuity Income Benefits until the beneficiary dies income benefits: AA Joint Life Annuity on two annuitants will pay annul a. As long as both annuitants are still alive b. Until the first annuity dies ©. Tothe beneficiary for a certain p both annuitants are still alive 4d. To the beneficiary for a certain period of time, or until a fixed amount has been paid, after both annuitants have died of time, or until a fixed amount has been paid, as long as A Life Income with Refund Annuity provides annuity income benefits for the lifetime of the annuitant and guarantees that the insurer will pay income benefits at least equal to the purchase price of the policy. If the annuitant dies before that then: a. The annuitant loses an amount equal to the difference between the purchase price of the policy and the total amount of the annuity income benefits paid out 50 far b, The insurer will pay an amount equal to the difference between the purchase price of the policy and the total amount of the annuity income benefits paid out so far ©. The insurer will pay the sum assured stated im the policy to the beneficiary _ The insurer will pay the purchase price of the annuity to the beneficiary An increasing rate annuity will: a, Allow the holder of the annuity to exchange domestic currency to a foreign currency ata fixed exchange rate Increase the annuity income benefits each year ata certain percentage Increase the premiums payable so as to protect the insurer against inflation d._ Pay out annuity income benefits dependent on the risk-free rate (Le. the same rate as government bonds) of interest es56. 60. 61 62, 63. Module 9 (S03) Private & Confidential When the annuity matures, the payments made by the insurer to the annuitant are known as annuity ‘income benefits. a. True b. False ‘The two main categories of annuities are accelerated and deferred annuities. a. True b. False The statutory retirement age is 55 years old. a True b. False Payout Options are the insurer's right, but not the obligation, to pay annuity income benefits. a. True b, False Deferred Annuities can be paid in the following modes: Single, Monthly and Annual premium. a True b. False A group plan where members pay part or all of the premium is also known as: a Contributory plan b. Non-Contributory plan ©. Guaranteed pian .Non-guaranteed plan Which of the following situation(s) is/are FALSE? The commencement of cover for an individual employee will only begin: [When the employer forward all the premiums payable for ALL the employees within the grace period Il, When the employee pays the premium to the insurer IIL. When the employee is actively at work from the effective date of the coverage regardless of whether he/she is Full-time or Part-time but is a permanent staff IV. When the Group policy has acquired enough cash value a. T&M b. 1&IV ¢. Allof the above at ‘Which one of the following is NOT a condition for termination of coverage for an individual employee: a. When employer reaches a specified age b, When employee is away from active work due to sickness injury for more than six months cc. When employer does not pay up the premium within the grace period 4d. When employee decides not to continue with the planModule 9 (Set3) Private & Confidential 64. What must be done when ant employer wants to make a claim on an employee's death: 1 Give a written notice of death of the insured employee to the insurer within 30 days Il, Submit certified true copy of the birth and death certificates Il Submit a copy ef the death claim forms IV. Submit a police report, if the cause of death is accidental Tonly L&I HA & IV Allof the above 65. Which of the following are NOT required to make a TPD claim on an insured employee: a. TPD claim form b, Copy of the pay slip <. Copy of the birth certificate 4d. Coroner's report to proof that the claim is valid 66. Group Insurance is a group of many individual term or whole life policies. a True b. False 67. A person does not have to be a member of the group to receive coverage under a group insurance policy. However, the group must be formed for a purpose other than to obtain insurance. a. True b. False 68. Premiums charged on Group Term Life Insurance policies are based on the average group to be insured, the size of the group and the past experiences that the insurer has had with the group. a. True b. False 69, An insured employee is said to be suffering from a TPD if he/she cannot ever do or perform any work occupation, or profession, a. True b. False 70. In place of extended benefits, some insurers also provide repatriation benefits up to a certain limit. a. True b. False 71. Ina front-end loaded policy, the amount of premiums allocated to purchase units a. Increases proportionately every year for the first 4 years 'b._ Ishighest in the first year and reduces thereafter c. Decreases gradually from year 1 d. Varies by policy year and is different for the different companies 72. Which of the following funds has a larger mix of equities and a smaller mix of fixed income securities? a. Property funds b. Cash funds Equity funds d. Managed funds74. 7. Modite 9 (5213) Private & Confident In the Distribution Units structure of investment-linked funds, the investment incomne of theses funds is distributed to a, The policyowner b. Shareholders cc. The life insured d. The insurer first and any excess to the policyowner, ‘This type of fund is designed according to an existing fund. It follows very closely the composition of the existing fund. What type of fund is it? a. Mother Fund b, Feeder Fund x. Portfolio dd. Mirror Fund Capital Guaranteed Funds I. Guarantee the investor a minimum rate of return on their investments after a certain period of time I. Have a significant portion of the fund invested into fixed income instruments, IIL The balance in derivates are commonly clase-ended él W&M Téei Allof the above oP aD Given the following information, answer Questions 76 to 78. Mr. Toh, aged 30 and of standard life invested $25,000 as a Single Premium ILP. Offer Price = $1.40 Bid-offer spread = 3.5% Policy Fee = $150 ‘Top-up Charge = $80 + 0.5% of top-up premium Administrative and Mortality Charge = 3% of Single Premium Sum Assured = 125% of premium or value of units, whichever is higher 76. 77. If Mr. Toh dies at the end of the 8" year, what is the death benefit payable? a. $39,620 ‘b. $39,882 cc. $40,208 d. $40,817 If Mr. Toh tops up $5,000 five years after inception of policy, what is the additional number of units that he can buy? a. 2495 b. 2551 cc. 2,345 d 2446Module 9(Set3) Private & Confidential 78. Whatis the return on gross premium in 8 years’ time? a 6% b 7% 8% ad 9% Given the following information answer Questions 79 to 81. Ms, Lee owns $2,000 per annum regular premium 1LP Offer Price = $1.20 Bid-offer spread = 5% Annual rate of cover = $1.50 per thousand ‘Top-up charge = $50 + 1% of top-up premium Death cover = Chosen death cover of $25,000 plus value of the units Growth rate of unit = 5% pa Premium allocations: Year1 Year 2 Year 3-9 = 100% Year 4 and thereafter = 105% Assume that the policy fee, administrative and mortality charges are deducted annually, after the annual premiums is paid at the beginning of the year. 79. Whatis the total number of units at the end of the 3 year? a. 1487 b. 2,084 2251 a. 2,362, 80. If she decides to surrender her policy in year 1, what is the cash value? a 0 b. $74.06 <. $905.16 d. $814.80 81. Mr. Boo bought a Regular Premium ILP and the death benefit is the higher of the value of units or $80,000, Assuming that the annual rate of cost of life cover is $1.00 per thousand. What is the monthly mortality cost if there are 892 units in the account and the bid and offer prices at that time are $1.52 and $1.60 respectively? a $3 b. $7 c $9 d. $10Module 9 (S23) Procate & Confidential 82. Which of the following statements about Investment-Linked Annuities are FALSE? 1. The term of the annuity is for a specific period IL. Itcan generate a stream of income for the policyowner for as long as he lives Il Itis suitable for investors who havea limited time horizon 1&ll 1&1 Néill Allof the above nog 83, In the Single Pricing concept, a, Policyowners always buy units based on the price at policy inception b. Policyowners always sell units based on the price at policy inception ¢. Policyowners buy units at the forward price which is the highest 4. Policyowners buy and sell units based on a particular price, after deducting the sales charge 84. The amount of income tax relief one can claim on insurance premiums paid in cash is a. Upto 7% of capital sum assured b. 100% of annual premium <. $5,000 a Nil ‘85. If a person has annual CPF contributions of $10,500, it would be advisable to: a. Purchase a life insurance policy through CPFIS or SRS b. Purchase a life insurance policy, regardless of payment method (ie. cash, CPFIS or SRS), to protect his/her wealth ¢. Purchase an investment-linked policy as he/she has the money to spend and would be a risk seeking investor 4. Purchase an investment-linked policy as he/she has the money to spend and would be a balanced investor 86. Mr. Wee purchases a straight life annuity. During the liquidation payout, Mr. Wee dics. In this case a. The insurer will cease forwarding annuity income benefits to Mr. Wee b. The insurer will cease forwarding considerations to Mr. Wee c. The insurer will refund an amount equal to the purchase price minus and considerations already forwarded to Mr. Wee d. The insurer will refund the purchase price 87. Consider the following scenario: A friend of yours is risk-averse and undecided on whether she should purchase a non-par ot par annuity. Her indecision is due to her budget problem. She approaches you for advice and as a financial services adviser you would: a, Advise her that since she is risk averse and has a budget problem, she should purchase a non- par product as itis cheaper and also because the bonuses payable on par products are not guaranteed b. Advise her that both par and non-par products are equally good and it does not matter which she chooses €. Advise her to purchase an ILP as the returns could bring her out of her budget problem. d. Advise her to purchase derivates as these have the highest potential return and could bring her out of her budget problemModule 9 (523) Private & Confidential 88. A risk-averse client who is thinking of purchasing an Investment-linked Annuity should opt for: a. Fixed annuity income benefits b. Variable annuity income benefits It does not matter whether the annuity income benefits are fixed or variable d. Family Income Benefits 89, Knowing the client's Assets and Liabilities will enable the adviser to: 1. Decide on the product to recommend, based on the commission he can get from it IL Determine if the client has funds in place to meet his needs IIL. Purpose insurance coverage to protect his client's liabilities in the event of his premature death lel leu W&M Allof the above apoE 90. CEDLI was appointed by the MAS to promote transparency, competitiveness and efficiency in the distribution of life insurance products. a. True b. False 91. A client's emergency fund should be in the range of six to nine months of his/her income a True b. False 92. Under the CPFIS Scheme, the use of CPF savings to purchase insurance policies does not attract any tax. a. True b. False 98. Under the SRS Scheme, the contributions are tax-free and upon withdrawal on the retirement age, only 50% of the amount withdrawn are subject to income tax. a True b. False 94. The reason policies are back-dated is to Start coverage sooner Have the policy mature sooner Give immediate coverage to the life insured Enjoy lower premium if one has just passed his birthday poge 95. The purpose of underwriting is to a. Ensure that only those who can afford to renew their policies are given coverage b. Ensure that the ratio of medical and non-medical application remain balanced Allow those who cannot usually be insured be given some form of coverage but with a rating, d. Ensure that he premiums charges corresponds to the risk of the applicant 96, A Financial Questionnaire is required to be filled up if a. The applicantis of high net worth b. The proposed sum assured is large ¢. The proposed life insured is not the applicant d. There is reason for the insurer to believe that the policy may lapse if issuedModul 9 (Se) Private & Confdental 97. Risk commences when a. The application is submitted with full premium payment b. The insurer issues the letter of acceptance cc. The full premium is paid and the letter of acceptance is issued d. The policyowner receives his policy 98, In Group Life Insurance, some af the factors that the underwriter considers include a. Reason for existence, age and gender within the group and group stability b. Reason for existence, occupation of each member of the group and the group size c. The nature of the group’s business, expected persistency and occupation of each member of the group 4. The nature of the group's business, the health of every member of the group and the group size 99. Mr. Tee wishes to change from an annual premium mode to a monthly, 4 months after he has paid his renewal premium. In this case, a, The insurer will refund the 8 months of premiums and start the new mode in the following month b, Mr. Tee has to top-up the premiums already paid as the monthly mode costs more c. Mr. Tee has to wait till the policy anniversary before the change is effected. d. There ts no provision to do so unless itis from a monthly mode to an annual mode 100. The different types of premium receipts are a. Conditional receipt, binding receipt and official receipt b. Conditional receipt, binding receipt and discharge receipt ©. Conditional receipt and renewable premium receipt d,_ Binding receipt official receipt and cash receipt 101. Mr. A is a male clerk, aged 23. He does not smoke and purchases a Whole Life Policy. Which of the following persons will pay a lower premium than him? a. Male actor, aged 23, smoker b. Male real estate agent, aged 24, non-smoker ¢. Female clerk, aged 24, non-smoker d. A military fighter pilot, aged 22, smoker 102. Indicators of moral hazards in life insurance underwriting include: 1, Overinsurance on the part of the insured in the eyes of the underwriter Tl. Avoidance of medical examination on the part of the proposer IIL, Taking up insurance at older ages IV. Unusual life style of the proposer 1& Tonly Wé Illonly LU & Monly LIL Mm & IV pore 103. The most important factor in determining, how extensive the physical examination of the proposed life is a. The age of the proposed life b. The amount of insurance applied for ¢. The occupation of the proposed life d. The sex of the proposed lifeModule 9 (Set) Private & Confidential 104. Which of the following are some of the requirements for the issuance of a duplicate policy? 1 The payment for the cost of duplication TI, A statutory declaration that the policy has not been assigned to any person IIL A written request for the issuance of a duplicate policy, stating the circumstances of the loss IV. A declaration that ifthe original policy is found subsequent to the issue, it shall be returned to the insurance company for cancellation 1& Monly LM& only M& Monly LILM&IV ao 105. Which of the following statements are TRUE for the assignment of a life insurance policy? 1. The assignee assigns his rights to the assignor Il. Assignment can be made by an endorsement on the policy TIL Priority of any claim will depend upon the priority in the date of receipt of the notice of assignment IV. The insurer is liable to the assignee and can be sued for making wrong payment even ifno written notice is received a. Téllonly b. T&[lonly « 1&Monly d. IL TT& IV only 106. Which of the following statements regarding alteration is TRUE? 1. Anincrease in the sum assured is usually allowed by insurance companies in Singapore TL Decrease in sum assured is permitted provided it does not fall below the minimum amount of sum assured prescribed IML The cash value in a“ part surrender” category of alteration can be used for the payment of future premiums IV. Extra riders, once purchased, cannot be removed a. [éIonly b. 1.1 &llonly c. 1éHlonly dL 0&IVonly 107. Mr. B purchased a non-participating whole life policy on 1 July 1992. On 1 April 1998, he decided to convert it into a participating Endowment Policy. On what date would the change be effected? 1 April 1998 b. 1 July 1998 31 December 1998 Change is not allowed108. Endorsement to an insurance poli 1 1 IL Vv. nore Module 9 (S23) Private & Confer y is effected by: Replacing the old policy document with anew one Printing on the original policy Attaching a printed sheet to the policy Issuing a letter to the policy-owner 1& only 1 Ilfonly 11 & Ml only ILM & IV only 109. The following are considered proper claimants under Section 61 (6) of the Insurance Act (Cap 142) 1 0, M1. aoge Niece or Nephew Spouse Parents 1 & only 1& Honly U& Ml only Allof the above 110. Mr. Lam died from an automobile accident. His policy allows him to claim accident death benefit. Which of the following documents are required to make the death claim? I u. ML W. po ee Report of death from last medical attendant on the deceased Statutory presumption Coroner's report Death certificate Wonly 1& Ionly U& Ilonly ML& IV only 111. Mr. Lim has disappeared without a trace for nine years. His wife and children do not know if he is alive or dead, but wishes to claim death benefits for a policy he has bought. What should they do first? b, c a. Obtain a statutory presumption of death Lodge a formal appeal to the board of trustees Obtain a death cettificate from the coroner's office Make a public pronouncement of death in the media 112, Where the life insured dies without a WILL, his claimants will have to apply to the Court for a/an: a. b. c 4. Letter of Probate Letter of Administration Letter of Indemnity Estate Duty Certificate 113, Where the life insured dies with a WILL, his claimants will have to apply to the Court for which of the following document: b. © d. Letter of Probate Letter of Administration Letter of Indemnity None of the aboveModile 9 (Ser3) Private & Confidential ‘114, Mr. Bis a Singaporean, aged 65. He died on 1 June 1998. He made a donation of $20,000 to the Community Chest of Singapore on 31 October 1997. He left behind the following properties. One condoininium valued at $2 million which was rented out at $6,000 per month. One bungalow, valued at $6 million, which was owner-occupied. One bungafow worth $2 million in London. A factory in Jurong valued at $10 million. CPF balance of $500,000. A whole life insurance policy with sum assured of $200,000. What is the total estate duty payable by the surviving family members? a. $500,000 b. $506,000 cc. $511,000 d. $561,000 115, Mr. X is a life agent and promises his client that the company will still accept the first premium after 4 weeks from the issue of letter of acceptance. If the insurer accepts the above act of the agent, this is called: a. Implied Authority b. Customary Authority ©. Apparent Authority dd. Ratification 116. Which of the following actions are prohibited for life agents? 1. Ask his wife to sell life policies on his behalf I, Make minor changes to the policy INL issue receipts for premium collected IV. Collect the first installment of premium on behalf of the insurer a, 1&Ionly b. L Mell . [é&llonly d. 1&Monly 117. What are the fiduciary duties of an agent? 1. Tocarry outhis cuties with reasonable care I. To perform his duties personally Il. Account for money received a, U&llLonly b Lnel « Té&Ilonly d. TéIlonlyModule 9(Se3) Private & Confidential 118. Which of the following constitute the entire policy contract? L 1. ut, Vv. a, b. « d. 119. Which of the following statements concerning the conversion to a Pai 1 cit uL W, a b. ce 4 The policy document Premium payment receipts Anniversary statements Endorsements 1& Monty 1&IVonly 1 & Ifonly 1, UL & IV only sup Policy is INCORRECT? ‘The sum assured is reduced and payable under the same terms and conditions as the previous policy ‘The premium payable for this paid-up policy is the same as the original policy ‘The paid-up policy will lose all the bonuses already declared in the previous years ‘The paid-up policy is non-participating 1, 1& Wonly 1& only U & Mlonly 1& IV only 120. Under the Automatic Premium Loan provision, the policy lapses under which of the following conditions: b © a. Where the outstanding loan plus interest exceed the cash value of the p ‘When the policy-owner dies When the outstanding loan is repaid without interest ‘When the policy-owner fails to pay the premium after the grace period 121. Under the extended term insurance option, the insurance company uses the net cash value of the policy to: a 7 a Purchase a term insurance for a reduced sum assured for as long as the cash value can purchase Purchase term insurance for the full sum assured for as long as the cash value can purchase Purchase a term insurance for the same duration as the original policy Purchase a single premium annuity 122, An individual is advised to make a will in his lifetime because of the following advantages: L cit mm. WV. He can distribute his wealth to parties he likes He can effectively cut off those whom he dislikes, He can ensure that wealth is quickly distributed upon death He can prevent possible arguments over his estate 1&Ionly LIL& IV only TI &1V only LAL W& IVModule 9 (Ses Private & Confidential 123. Mr. Liew boughta life insurance policy two years ago and passed away just recently. Who would be considered the proper claimants of the policy according to the Insurance Act (Cap. 142), Section 63 (6)? a b © a Mr. Liew’s wife Mr. Liew’s business partner Mr. Liew’s adopted child Mr. Liew’s creditor 124, Which categories of person CANNOT enter into a contract of insurance in all circumstances? 1 I 10. Vv. aooe ‘An undischarged bankrupt A drunkard who is known to be of unsound mind A person above 10 years A person below 21 years 1& Honly 11 Hfonly M& Moniy TM & IV only 125. When a proposer completes the proposal form and pays the first premium fo the insurer, he has: a b. 4. Made a counter-offer Accepted the offer Made an offer Made a promise to pay future premiums 126, Which of the following statements are FALSE? L 0. M1. aege ‘The surrender value is the consideration for the promise by the policy-owner to forgo all rights under a policy insurance A minor between 10 fo 16 years of age can enter into a contract of insurance with the consent in writing of his parent ‘A minor can assign his insurance policy contract entered by a lunatic is not binding on him in all circumstances 1 & Honly 1& Honly 1 & fonly & IV only 127. When a life insurance agent collects a deposit for the first installment on premium, he should perform which of the following acts? L 1 Mm. Vv. aoge Remif the premium payment to the principal immediately Remit the premium payment at the end of the grace period Make minor changes to the terms of the policy if requested by the life insured ‘Agree to pay the first premium if the insured is short of cash Lonly I & IV only L1& IV only LIL M&IVModule 9 (S213) Private & Comfderial 128, Which of the following sources of income is subjected to income tax? I. Insurance proceeds TL. Interests from Investments IIL. Profits derived from the business only Monly & Ilonly 1M & I aoe 129, Ms. Lee works as an administrative officer. She earns an annual income of $26,000 per annum. She contritmutes to CPF at the rate of 20% per year. She owns a Whole Life Policy and pays an annual premium of $600. What is the tax relief available from her insurance policy? a Nil b. $600 cc. $5,000 4. $5,200 130. Which one of the following items CANNOT be claimed for income tax deduction? 1. Life insurance premiums paid on the policy-owner's life Il, Life insurance premiums paid on the life of a child of the policy-owner IIL Life insurance premiums paid on the life of the wife of the policy-owner a. Lonly b. Monly © 1&lfonly d. LM&ut 131. Madam Low is self-employed and does not contribute to CPE. She pays an annual premium of $1,200 for an endowment policy on ker own life and §960 for a Whole Life Policy on the life of her husband. What is the total tax relief that she can claim for the two insurance policies? a. $960 b. $1200 cc. $2,160 4. $5,000 132, Mr. Tamilselvam is a Smgaporean, age 55. He died on 1 May 1998. He made a donation to an approved charity of $25,000 on 30 Feb 1997. He left behind the following properties: One semi-detached house, valued at $3 million, which was owner-occupied. (One house in New Zealand worth $2 million. Fixed deposit in New Zealand of §200,000 A shophouse in Serangoon Road, valued at $3 million, CPF Balance of $800,000 A whole life insurance policy sum assured of $100,000 Given the rate of estate duty for the first $12 million is 5%, what is the total estate duty payable by the surviving family members? aoge $155,000 $165,000 $166,250 $175,000Modide 9 (Set3) Private de Confidential 193. The insurance proceeds of a life policy taken up by a life insured on his own life is subjected to which one of the following taxes? a. Estate duty b. Income tax ©. Corporate tax d. Capital gains tax 134. Which of these are characteristics of insurable risks? 1. The loss must oceur by chance Tl. The loss must be definite TIL The loss must be significant IV. The loss must be predictable V. The loss must not be catastrophic to the insurer a, 1&IVonly b. 1&Vonly © ILI & IV only d. Allo the above 135. What are the business uses of life insurance? L_ Credit enhancement IL Business continuation II. Cover for losses suffered in business. IV. Employee benefit plan a. L1&Monly b, L&Vonly & [U1& IV only d. [&lonly 1136. Which one of the following is nota type of personal risk that can be insured? 1. Premature death IL Minor illness AIL utliving resources IV. Poor health a. Tonly b. Honly « Honly d. 1Vonly 137. Which of the following CORRECTLY defines a contract of indemnity? It refers to an insurance contract which: a. Indemnifies the insured against third-party liability b. Indemnifies the insured against any libel suit from a third-party cc. Compensates the insured for the actual amount of financial loss when a claim arises dé. Compensates the insured a pre-determined amount, as stated in the policy, when a claim arisesModule 9(Se3) Private & Confidential 138. Which type of breach of utmost good faith is reflected in the following statement? Statements made with intention of deceiving and known by the person or made recklessly without any faith in their corrections. a, Non-disclosure b. Concealment c._ Innocent misrepresentation d. Fraudulent misrepresentation 139, Which one of the following is the range of investment products which falls under the ambit of the Financial Advisers Act, 2001? a, Securities b. Loans and mortgages c. Deposit-taking products dd. General insurance products 1140, How should the financial adviser actin the best interest of its clients? a. By treating only favored clients fairly and equitably b. By showing favoritism or biasness to particular client cc. By avoiding situations where conflicts of interest may arise 4. By paying more attention to high net worth clients than those with a low budget 141. Which of the following institutions are exempt financial advisers under the Financial Advisers Act, 2001? I. Joint Law Ventures registered under Legal Profession Act Il. Banks licensed under the Banking Actand Merchant Bank approved under Monetary Authority of Singapore Act I. Corporations registered under the Insurance Act and holder of capital market services license \der the Securities and Futures Act a. L&Ilonly b. [&Illonly c. 1& Monly dL 0&M 142. The aim of a secondary market for financial assets is to: a, Encourage speculative trading b. Provide liquidity for the financial assets ¢. Enable small-medium enterprises to raise needed capital 4, Serve as a trading lace for the financial assets of sinall to medium-sized companies 143. Which of the following is TRUE regarding the relationship between risk and return? a. There is no relationship between risk and return b. The greater the risk, the lower the potential return, c. The greater the risk, the greater the potential return d. Low risk investments always provide the greatest return 144, Which of the following information is NOT required to be disclosed in the materials and brochures used to market investment-linked Life Insurance policies? The principal features of the policy ‘The methods of selling the policies The basis of computing all policy benefits The charges to be borne by the policy-owners poopModule 9(Se13) Prove Confdental 145. Single Premium policy is a policy a. Where the premium is paid at the beginning of the policy in one lump sum That allows its policy-owner to make single premium payments on a regular basis to his policy That allows the policy owner to pay his premium on a yearly, half yearly, quarterly or monthly basis d, That is applicable only to Yearly Renewable Term Insurance 146. The statement to policy-owners on the performance and value of their investment-finked policies must contain which one of the following information? a. Premiums received prior to the statement period b. A waming to the risks to be borne by policy-owners ©. Current death benefit at the end of the current statement period d. A list of the investments held by the sub-fund as of the reporting date 1147. Which of the following statements about a Term Life Insurance policy is/are TRUE? I. _Ithas the automatic premium loan feature Tl, It may be surrendered for a cash value after it has been in force for five years TIL Itcovers the insured against death if it happens during the specified period of th term a. Lonly b. Monly © Monly a T&M 148, Endowment Insurance: a. Hasa fixed maturity date b. Is another type of permanent insurance Combine insurance protection into a savings plan for the policy-owner Has all the above characteristics 1149, Which of the following are NOT the features of the Critical Illness riders? a. Acquires cash value b, No minimum and maximum sum assured restriction € Assignment is not allowed d. All of the above 150. Equities are suitable for people who: 1 Are risk seekers Tl. Have long-term investment horizon TI. Have short-term investment horizon a. 1&Ionly b. 1é& Il only I &Illonly déModule 9(Set3) Private & Confdentia! 151. Which of the following persons will be eligible for tax relief on the premiums paid on a life insurance polly according to the existing tax lave in Singapore? ‘A father who buys a policy on his son’s life i A husband who buys a policy on his wife's life Ill. Any individuals who buys a policy on his/her own life a. 1&Ionly b. 1&Illonly ¢ M& Ionly do Wer 152. A policy that shares in the company’s excess funds or divisible surplus is called a: a. Permanent policy b. Participating policy ¢. Non-participating policy d._ Term policy 183, Which facility allows a policy-owner freedom to move part or all of his money from one fund to another? a. Shifting b. Relocating Transferring d. Moving 154. The practice of dollar cost averaging: a. Involves investing more in a fund when the unit price is low and less when itis high b, Isa technique to time the financial market ©. Offers affordability to small investors d. Involves investing the same amount in a fund at regular intervals 155, Investment-linked policies (ILPs) differ from unit trusts in that ILPs a. Invest in less risky assets b. Guarantee a fixed rate of return Provide insurance and other coverage 4d. Charge administrative expenses through a fund management fee only 1156, What is the major difference between ILPs and Unit Trusts? a. _ILPs provide insurance cover as well as investment returns whereas Unit Trusts provide only investment returns b. _ILPs provide investment cover whereas Unit Trusts provide only investment returns . _ILPs provide investment returns whereas Unit Trusts provide only insurance cover 4d. ILPs provide insurance cover as well as investment returns whereas Unit Trusts provide only insurance cover 187. Who selects the stocks and /or bonds in which the funds invest? a. Professional fund officer b. Professional fund manager or investment adviser ¢. Investment administrator d. Fund managerModule 9 (S013) Private & Confidential 158, What risk classification describes a person who is prepared to accept some losses provided the expected medium to long term return on the investment is significantly higher than fixed deposit rates? a. Risk Averter b. Cautious ©. Balanced d. Risk-seeker 159, The LIA’s Guidelines on Needs-Based Sales Process require the representative to gather information on the potential client's: a. Financial situation, needs, objectives and goals b. Health condition ¢. Risky habits and avocation d._Allof the above 160. What purpose does “Term Insurance” serve? a. Savings purposes b. Investment purposes c. Death protection plus total and permanent disability (TDP) protection Only TDP protection 161. In normal circumstances, itis advisable to insure the life of a. Children b. Breadwinner and the spouse c. Only the spouse d. All dependents 162. Which one of the following policies is apt if the need is that of decreasing nature? a. Fndowment policy b. Whole life policy c. Level Term Insurance Policy . Decreasing Term Insurance Policy 163. Which of the following is a characteristic of the Guaranteed Insurability Option Rider? ‘a. The owner of the rider has the right, but the obligation, to exercise the option to purchase additional amounts of insurance at any time he/she wants without evidence of insurability b. The owner of the rider has the right, but not the obligation, to exercise the option to purchase additional amounts of insurance at any specific intervals over an extended period of time without providing evidence of insurability ¢. The owner of the rider has the obligation to exercise the option to purchase additional amounts of insurance at any specific intervals over an extended period of time without providing evidence of insurability d._ The owner of the rider, upon exercising the option, can purchase any anount of additional coverage but premiums will be charged based on the insured’s age when the option is exercised 164, Paid-Up Addition occurs when: a. The client pays up all future premiums remaining on the policy b. Cash bonuses are converted to additional sum assured The client uses SRS or CPFIS to pay premiums d. The client converts a regular/single premium policy to alimited-pay policyModule 9 (Se3) Privowe & Confidertal Answers Qns | Ans 51 52 53 54 55 56 57 58 59 60 ita 112 113 114 115 116 117 118 119 120 Qns| Ans AL 42 43 44 45 46 47 48 49 50 101 102 103 104 106 107 108 109 110 ‘Ans Qns 161 162 163 164 D_ | 105 Ans 31 32 33 34 35 36 37 38 39 40 ot 92 93 94 95 96 97 98 99 100 Qns 151 152 153 154 155 156 157 158 159 160 Ans. 21 22 23 24 25 26 27 28 29 30 81 82 83 84 85 86 87 89 90 Qns 141 142 143 144 145 146 147 148 149 150 Ans |Qns| Ans |Qns| Ans |Qns| Ans |Qns| Ans B c Qns| Ans |Qns| Ans | Qns| Ans it 42 13 14 15 16 17 18 19 20 71 72 74 75 76 77 78 79 80 Qns | Ans 131 132 133 134 135 136 137 138 139 140 Ans Ans D A 8 Qns 10 Qns | Ans | Qns 61 62 65 66 67 68 69 70 Qns 121 122 123 124 125 126 127 128 329 (130